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Poland to Opt for More LNG and Less Russian Gas

Poland does not plan to renew a long-term gas supply contract with Russia when its current deal with Gazprom expires in 2022, a government official responsible for gas and power infrastructure told Reuters on Monday.

Polish state-run gas firm PGNiG buys up to 10.2 bcm of gas a year from Russian gas giant Gazprom, accounting for the bulk of Poland’s annual consumption of nearly 15 bcm. The contract, signed in 1996, expires in 2022.

To reduce its reliance on Russian gas, Poland has built its first liquefied natural gas (LNG) terminal and plans to build a pipeline to the North Sea.

“We will be aiming at a situation where a long-term contract becomes a thing of the past. If the price of Russian gas is competitive enough we do not rule out buying it, but definitely not as part of a long-term contract,” government energy official Piotr Naimski told the Reuters Eastern Europe Investment Summit at Reuters’ office in Warsaw.

He said that thanks to the LNG terminal Poland will be able to import up to five bcm (about four mtpa) of gas annually. So far, one long-term contract has been agreed for the terminal – for Qatargas to supply PGNiG with 1.5 bcm annually.

PGNiG also plans to build a pipeline to carry gas from Norway to Poland to reduce Poland’s dependence on Russia and is due to present details of its plan later this year. It would be up and running by 2022.

Naimski said Poland would be able to import 10 bcm of gas annually through the pipeline, which would run from Norway through Denmark and the Baltic Sea to Poland. The project is being analysed by gas grid operators from those countries and Naimski, who will visit Denmark on Wednesday to talk about the project, would not disclose the pipeline’s estimated cost.

Poland is also still assessing whether to merge its oil and gas companies, he said.

Its treasury minister said in January he was considering tie-ups between the state-run oil refiners PKN Orlen and Lotos, and PGNiG, to forge central Europe’s No.1 energy company and prevent any hostile takeover threat.

But since then government officials have softened their tone on the plan.

“Various options are being considered at the moment, but there is no rush. We are analysing, calculating, this is being influenced by external conditions, oil prices. It could happen that some steps will be taken, but there is no such decision at the moment,” Naimski said.

“As a result of the analysis it could turn out that PKN Orlen and Lotos will remain separate companies, but it may also turn out that a decision about their merger is taken,” he added.

Naimski also said that Poland, which generates around 80 percent of its electricity from highly polluting coal power plants, will remain dependent on coal in the foreseeable future.

“Our power industry relies on coal and this will remain so for more or less 30 years. The actions which are aimed at ruling out this kind of energy are against our interests,” he said, referring to the EU’s decarbonisation policies.

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